Question 1

In a capitalist market economy,the decision to save is made by the same people who make the major investment decisions.

Accepted Answer

A) True 
 B)False

Question 2

One of the primary functions of markets could be labeled

Accepted Answer

A)  stimulation. 
B)  coordination. 
C)  planification. 
D)  decentralization. 
A)  stimulation. 
B)  coordination. 
C)  planification. 
D)  decentralization.

Question 3

Why does the aggregate demand curve slope downward?

Accepted Answer

The effect of higher prices on consumer

Question 4

A recessionary gap exists when potential GDP

Accepted Answer

A)  falls short of equilibrium GDP. 
B)  exceeds equilibrium GDP. 
C)  equals equilibrium GDP. 
D)  All of the above are correct. 
A)  falls short of equilibrium GDP. 
B)  exceeds equilibrium GDP. 
C)  equals equilibrium GDP. 
D)  All of the above are correct.

Question 5

Figure 9-1
  
-Using the standard 45-degree line diagram,how does an increase in autonomous consumption effect the expenditure schedule?

Accepted Answer

A)  It shifts the expenditure schedule downward. 
B)  It shifts the expenditure schedule upward. 
C)  It increases the slope of the expenditure schedule. 
D)  It decreases the slope of the expenditure schedule. 
A)  It shifts the expenditure schedule downward. 
B)  It shifts the expenditure schedule upward. 
C)  It increases the slope of the expenditure schedule. 
D)  It decreases the slope of the expenditure schedule.

Question 6

From the demand side,the equilibrium level of GDP is one at which

Accepted Answer

A)  everyone who wants a job has one and firms are not looking for extra workers. 
B)  the only unemployment is frictional. 
C)  aggregate demand equals production. 
D)  the only unemployment is cyclical. 
A)  everyone who wants a job has one and firms are not looking for extra workers. 
B)  the only unemployment is frictional. 
C)  aggregate demand equals production. 
D)  the only unemployment is cyclical.

Question 7

To eliminate a recessionary gap,the expenditure schedule should be

Accepted Answer

A)  shifted downward. 
B)  shifted upward. 
C)  made steeper. 
D)  made flatter. 
A)  shifted downward. 
B)  shifted upward. 
C)  made steeper. 
D)  made flatter.

Question 8

If total spending is greater than current output,GDP will rise.

Accepted Answer

A) True 
 B)False

Question 9

When income rises,total expenditures remain constant.

Accepted Answer

A) True 
 B)False

Question 10

The U.S.economy in 2009 was characterized by an excess level of output.This corresponds to a recessionary gap.

Accepted Answer

A) True 
 B)False

Question 11

If the expenditure schedule lies above the level of potential GDP,then there is a(n)

Accepted Answer

A)  recessionary gap. 
B)  precautionary gap. 
C)  deflationary gap. 
D)  inflationary gap. 
A)  recessionary gap. 
B)  precautionary gap. 
C)  deflationary gap. 
D)  inflationary gap.

Question 12

If total spending is less than the value of total output,firms

Accepted Answer

A)  may decide to cut prices. 
B)  may increase production levels. 
C)  will tend to raise prices. 
D)  will notice inventories falling. 
A)  may decide to cut prices. 
B)  may increase production levels. 
C)  will tend to raise prices. 
D)  will notice inventories falling.

Question 13

Identify the "oversimplified multiplier formula."

Accepted Answer

A)  Multiplier = 1 divided by (1 − change in GDP) 
B)  Multiplier = 1 divided by (1 − marginal propensity to consume) 
C)  Multiplier = 1 divided by (1 − marginal propensity to save) 
D)  Multiplier = 1 divided by (1 − rate of inflation) 
A)  Multiplier = 1 divided by (1 − change in GDP) 
B)  Multiplier = 1 divided by (1 − marginal propensity to consume) 
C)  Multiplier = 1 divided by (1 − marginal propensity to save) 
D)  Multiplier = 1 divided by (1 − rate of inflation)

Question 14

To avoid a coordination failure,the intentions of savers and investors must be both

Accepted Answer

A)  increasing. 
B)  at their planned levels. 
C)  more than full employment GDP. 
D)  at levels set by the government. 
A)  increasing. 
B)  at their planned levels. 
C)  more than full employment GDP. 
D)  at levels set by the government.

Question 15

In the circular flow diagram saving

Accepted Answer

A)  is a leakage and investment is an injection. 
B)  and investment are both injections. 
C)  is an injection and investment is a leakage. 
D)  and investment are both leakages. 
A)  is a leakage and investment is an injection. 
B)  and investment are both injections. 
C)  is an injection and investment is a leakage. 
D)  and investment are both leakages.

Question 16

Describe the role of business inventory change in determining the equilibrium level of GDP and changes in the level of GDP.

Accepted Answer

Inventories work as buffers in the econo

Question 17

If the economy is in equilibrium,it must be

Accepted Answer

A)  on the 45° line. 
B)  on the 60° line. 
C)  below the 45° line. 
D)  below the 60° line. 
A)  on the 45° line. 
B)  on the 60° line. 
C)  below the 45° line. 
D)  below the 60° line.

Question 18

The total expenditure schedule in Macroland begins with these initial levels (in billions of dollars): Income = 1,000; Consumption = 900; Investment = 200; Government = 300; Net Exports = −100.If the MPC = 0.75 and income increases in increments of 200,find the equilibrium level of income.If full employment requires an income level of 2,000,what (if anything)should the government do? Indicate both the direction of the spending change and the size of the spending change.

Accepted Answer

Initially,total expenditures equal 1,300

Question 19

The expenditure schedule will shift upward when

Accepted Answer

A)  net exports decrease. 
B)  net exports increase. 
C)  total imports increase. 
D)  total exports decrease. 
A)  net exports decrease. 
B)  net exports increase. 
C)  total imports increase. 
D)  total exports decrease.

Question 20

Investment increases by $200 million and the value of MPC is 0.75.What would be the total increase in spending?

Accepted Answer

A)  $200 million 
B)  $266 million 
C)  $750 million 
D)  $800 million 
A)  $200 million 
B)  $266 million 
C)  $750 million 
D)  $800 million

In a capitalist market economy,the decision to save is made by the same people who make the major investment decisions.

One of the primary functions of markets could be labeled

Why does the aggregate demand curve slope downward?

A recessionary gap exists when potential GDP

Figure 9-1 -Using the standard 45-degree line diagram,how does an increase in autonomous consumption effect the expenditure schedule?

From the demand side,the equilibrium level of GDP is one at which

To eliminate a recessionary gap,the expenditure schedule should be

If total spending is greater than current output,GDP will rise.

When income rises,total expenditures remain constant.

The U.S.economy in 2009 was characterized by an excess level of output.This corresponds to a recessionary gap.

If the expenditure schedule lies above the level of potential GDP,then there is a(n)

If total spending is less than the value of total output,firms

Identify the "oversimplified multiplier formula."

To avoid a coordination failure,the intentions of savers and investors must be both

In the circular flow diagram saving

Describe the role of business inventory change in determining the equilibrium level of GDP and changes in the level of GDP.

If the economy is in equilibrium,it must be

The expenditure schedule will shift upward when

Investment increases by $200 million and the value of MPC is 0.75.What would be the total increase in spending?

What Is Economics?

The Economy: Myth and Reality

The Fundamental Economic Problem: Scarcity and Choice

Supply and Demand: An Initial Look

An Introduction to Macroeconomics

The Goals of Macroeconomic Policy

Economic Growth: Theory and Policy

Aggregate Demand and the Powerful Consumer

Bringing in the Supply Side: Unemployment and Inflation?

Managing Aggregate Demand: Fiscal Policy

Money and the Banking System

Monetary Policy: Conventional and Unconventional

The Financial Crisis and the Great Recession

The Debate over Monetary and Fiscal Policy

Budget Deficits in the Short and Long Run

The Trade Off between Inflation and Unemployment

International Trade and Comparative Advantage

The International Monetary System: Order or Disorder?

Exchange Rates and the Macroeconomy

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Exam 9: Demand-Side Equilibrium: Unemployment or Inflation?

In a capitalist market economy,the decision to save is made by the same people who make the major investment decisions.

One of the primary functions of markets could be labeled

Why does the aggregate demand curve slope downward?

A recessionary gap exists when potential GDP

Figure 9-1 -Using the standard 45-degree line diagram,how does an increase in autonomous consumption effect the expenditure schedule?

From the demand side,the equilibrium level of GDP is one at which

To eliminate a recessionary gap,the expenditure schedule should be

If total spending is greater than current output,GDP will rise.

When income rises,total expenditures remain constant.

The U.S.economy in 2009 was characterized by an excess level of output.This corresponds to a recessionary gap.

If the expenditure schedule lies above the level of potential GDP,then there is a(n)

If total spending is less than the value of total output,firms

Identify the "oversimplified multiplier formula."

To avoid a coordination failure,the intentions of savers and investors must be both

In the circular flow diagram saving

Describe the role of business inventory change in determining the equilibrium level of GDP and changes in the level of GDP.

If the economy is in equilibrium,it must be

The expenditure schedule will shift upward when

Investment increases by $200 million and the value of MPC is 0.75.What would be the total increase in spending?

What Is Economics?

The Economy: Myth and Reality

The Fundamental Economic Problem: Scarcity and Choice

Supply and Demand: An Initial Look

An Introduction to Macroeconomics

The Goals of Macroeconomic Policy

Economic Growth: Theory and Policy

Aggregate Demand and the Powerful Consumer

Bringing in the Supply Side: Unemployment and Inflation?

Managing Aggregate Demand: Fiscal Policy

Money and the Banking System

Monetary Policy: Conventional and Unconventional

The Financial Crisis and the Great Recession

The Debate over Monetary and Fiscal Policy

Budget Deficits in the Short and Long Run

The Trade Off between Inflation and Unemployment

International Trade and Comparative Advantage

The International Monetary System: Order or Disorder?

Exchange Rates and the Macroeconomy

Filters